Markets Rebound on Trump Trade Comments, Bank Recovery Caps Volatile Week

Stocks ended the week on a high note, buoyed by upbeat comments from President Trump on U.S.-China trade relations and a sharp reversal in regional bank shares following Thursday’s selloff. Despite ongoing concerns around economic data delays and political gridlock in Washington, investors rotated back into risk assets, helping the S&P 500 post its best week since August. Bond yields ticked higher and haven assets like gold and silver retreated, as the mood turned cautiously optimistic.

Key Headlines & Market Movers

• Trump Calms Trade Fears: President Trump’s reassurances on China helped ease market jitters, stating that planned talks with President Xi were on track and hinting that proposed 100% tariffs may not materialize. His tone moderated fears of an imminent escalation in trade tensions, providing a tailwind to equities after a shaky start to the day.

Regional Bank Recovery After Loan Fraud Shock: The regional banking sector rebounded after Thursday’s sharp losses tied to new fraud-related charge-offs. Zions Bancorp and Western Alliance, which had been at the center of the turmoil, reversed steep overnight declines to close up 5.8% and 3.1%, respectively. Stronger-than-expected Q3 earnings from several lenders and lighter loan-loss provisions helped ease concerns of broader credit quality deterioration.

• Flight to Equities Despite Macro Uncertainty: Despite a partial government shutdown delaying key data, investors moved out of cash and into equities, with $28 billion flowing into stock funds last week. Fed speakers, including St. Louis President Musalem, hinted at potential rate cuts, reinforcing dovish expectations. Markets are now leaning toward another 25bps cut at the October meeting.
• Inflation Outlook and AI Optimism Support Bull Case: Strategists remain broadly constructive, pointing to resilient corporate earnings, a fading inflation impulse, and continued AI enthusiasm. TD Securities expects core CPI to moderate in September, and firms like UBS have upgraded equities to “attractive” citing favorable macro and earnings trends. AI-linked firms, however, saw mixed sentiment. Oracle sank nearly 7% as investors questioned its ability to meet cloud infrastructure demand.

S&P 500 Sector Performance

Looking Ahead

Investors will turn their attention to next week’s inflation data for confirmation that price pressures are easing, especially in core services. The Fed’s October meeting is increasingly viewed as a live one for a potential rate cut. Meanwhile, markets remain on alert for further developments in trade negotiations and any progress, or lack thereof, on resolving the U.S. government shutdown. Volatility remains elevated, but underlying sentiment has turned more constructive, with pullbacks increasingly seen as buying opportunities.